Companies face $1 trillion climate risk

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An analysis of more than 200 of the world’s largest companies has valued their collective climate risks at nearly US$1 trillion, according to a new report by CDP, which runs a global environmental risk disclosure system for investors.

According to the research, which covered companies with combined market capitalisation of close to US$17 trillion, more than 80 per cent of businesses will see major climate impacts on their operations, with many of the hazards likely to present themselves within five years.

Around US$500 billion worth of costs are rated as “virtually certain”, the report said, while the companies stand to write off a potential US$250 billion in losses from stranded assets—investments that are no longer viable due to changes to the climate or to regulation.

Nicolette Bartlett, director of climate change at CDP said: “The goalposts for climate action have never been clearer for companies. Our analysis shows that there are a multitude of risks posed by climate change, including impaired assets, market changes and physical damages from climate impact, as well as tangible impacts to business bottom lines.”

However, the report also noted that companies have identified US$2.1 trillion worth of opportunities in the transition to a low-carbon economy. Financial services stand to benefit the most, with US$1.2 trillion worth of opportunities, followed by manufacturing, at US$338 billion.

“Our collective response to climate change is more urgent than ever, and it is clear that corporate action cannot be delayed,” Bartlett said. “So it is hugely encouraging that companies are reporting that the potential value of climate opportunities far outweigh the costs of investing in the transition.

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